Correlation Between Laureate Education and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Laureate Education and Norsk Hydro at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Laureate Education and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laureate Education and Norsk Hydro ASA, you can compare the effects of market volatilities on Laureate Education and Norsk Hydro and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Laureate Education with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and Norsk Hydro.
Diversification Opportunities for Laureate Education and Norsk Hydro
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Laureate and Norsk is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Laureate Education is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Laureate Education are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Laureate Education i.e., Laureate Education and Norsk Hydro go up and down completely randomly.
Pair Corralation between Laureate Education and Norsk Hydro
Assuming the 90 days trading horizon Laureate Education is expected to generate 0.98 times more return on investment than Norsk Hydro. However, Laureate Education is 1.02 times less risky than Norsk Hydro. It trades about 0.22 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.07 per unit of risk. If you would invest 1,470 in Laureate Education on August 29, 2024 and sell it today you would earn a total of 400.00 from holding Laureate Education or generate 27.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laureate Education vs. Norsk Hydro ASA
Performance |
| Timeline |
| Laureate Education |
| Norsk Hydro ASA |
Laureate Education and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laureate Education and Norsk Hydro
The main advantage of trading using opposite Laureate Education and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education position performs unexpectedly, Norsk Hydro can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Laureate Education vs. Universal Insurance Holdings | Laureate Education vs. Sims Metal Management | Laureate Education vs. Jupiter Fund Management | Laureate Education vs. CeoTronics AG |
| Norsk Hydro vs. Superior Plus Corp | Norsk Hydro vs. NMI Holdings | Norsk Hydro vs. SIVERS SEMICONDUCTORS AB | Norsk Hydro vs. Talanx AG |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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